Mahindra bets on localisation, draws up plans for US plant

Houston: Mahindra USA is chalking out a plan to set up a greenfield manufacturing facility for tractors in the US in the next 3-5 years as it looks to cater to the growing demand for its products in the country.

The Houston-based entity, a wholly-owned subsidiary of the Mahindra group, gets a majority of parts from across its operations in India, Japan and South Korea and then assembles them to sell in the country.

"It makes sense down the line to have a factory in the US. The numbers are already there to have a factory in the US," Mahindra USA President and CEO Mani Iyer said when asked about expanding operations.

The company will also move to the bigger segment of tractors -- up to 160 hp -- with the setting up of the new facility, he added.

"We already have invested a lot, whether in brand, technology, distribution points, dealers and people. The number of products being made for the US market alone is very high. It will call for more localisation," Iyer said.

The current facility is running out of space as it has tripled over the last three years alone, he added.

When asked about the timeframe for setting up the plant, Iyer said: "We are yet to figure out the exact details, but it should be there in the next 3-5 years."

He, however, did not go into the details about the proposed investment for the facility.

The company, which generates revenue of around USD 600 million annually, is a major player in tractors ranging up to 120 hp. It is third in terms of market share in the segment, just behind the likes of Kubota and John Deere.

The firm has been growing in the range of 20-30 per cent in the US and now has a market share of around 12-13 per cent in the up to 120 hp tractor segment.

Mahindra USA plans to have over 40 launches this year that will include new models and refreshes of the existing tractor line-up. It gets all the major parts like engines, transmissions, clutches and the like from India, Japan and South Korea.

Over the years, it has been increasing the localisation content in vehicles in the US, which has now grown to around 30-40 per cent.

"What we do here is localise the peripheries -- batteries, seats and all the attachments," Iyer said.

From selling 500 units almost a decade ago, Mahindra sells in the range of 32,000 units in the US per annum with around 26,000 tractors and the rest being utility vehicles that are mainly used for agricultural and recreational activity.

The company aims to ramp up its sales network across North America and is eyeing Latin American countries, including Brazil, for future growth too.

It has nearly 550 dealers in the US, which would be scaled up to around 750 over the next 2-3 years. It also has five distribution centres in the country and one in Canada. The automaker is in the process of setting up a distribution centre in Mexico as well, which will be operational by this month-end.

"Besides, we are looking to scale up business in Brazil, the largest market in Latin America," Iyer said.

The US will be the focal point for North America and Brazil for Latin and South America, he added. The company is looking at a market size of 1 lakh tractors in the region.

Mahindra USA employs some 2,500 people, directly and indirectly, with over 99 per cent Americans.